Margin Company Has Total Fixed Costs of $360,000 and Variable

question 74

Essay

Margin Company has total fixed costs of $360,000 and variable costs of $14 per unit. If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units. Should Margin reduce its per unit sales price and pay for the additional advertising? (Support your answer with calculations.)

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Definitions:

World Price

The international market price of a good or service, influenced by global supply and demand.

Import

Bringing in merchandise or services from overseas with the intent to sell them within a country.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing the benefits one misses out on by choosing one option over another.

Trade

The exchange of goods, services, or both between individuals, businesses, or countries.